It took less than a week for a group of freelance writers and editors to file this federal court lawsuit to block enforcement of the U.S. Department of Labor’s new independent contractor rules, which I wrote about here last week.
If you thought the DOL’s final rule would sail through without a fight, think again.
According to the plaintiffs, the impetus for their lawsuit is their attempt, as individual entrepreneurs, “to remain independent in the face of concerted efforts to force them into employment relationships they neither want nor need” through a “vague, new standard” from the DOL that “provides no objective direction to anyone.”
The new DOL rule, which became final on January 10, applies six factors — none of which is dispositive — to analyze employee or independent contractor status under the Fair Labor Standards Act:
- opportunity for profit or loss depending on managerial skill;
- investments by the worker and the potential employer;
- degree of permanence of the work relationship;
- nature and degree of control;
- extent to which the work performed is an integral part of the potential employer’s business; and
- skill and initiative.
The plaintiffs also highlight “a seventh, catch-all factor” through which the Department may consider relevant additional factors “if the factors in some way indicate whether the worker is in business for themsel[ves].”
In contrast to the previous 2021 rule, which emphasized “two core factors,” opportunity for profit or loss and nature and degree of control, the plaintiffs express concern that this new totality-of-the-circumstances test is so “indefinite” to offer no clear guidance to individuals and businesses about who may be an employee or independent contractor.
The DOL posits that the new test aligns with decades of case law. But your mileage may vary depending on where and why you litigate these claims. Different jurisdictions decide these cases differently based on different facts and circumstances. The plaintiffs complain that the DOL compounds the problem in its final rule by “cherry pick[ing] language from cases it likes and discards cases it does not like.”
The plaintiffs seek an injunction to block the rule and a declaratory judgment to invalidate it permanently.
(Meanwhile, the Supreme Court will hear oral argument today in a case involving what kind of deference, if any, courts should afford administrative agencies, like the DOL, on the laws they administer.)
While we wait for the lawsuit to invalidate the DOL rule to build momentum, join me and John Baldino, President of Humareso, an award-winning provider of consultative human resources and talent management & strategy services, today at 1 pm ET on Zoom for “Independent Contractor Update – How Am I to Determine if I Am Compliant?”
We’ll discuss the risks of misclassifying employees as independent contractors, the DOL’s Final Rule, and proactive steps employers can take to avoid potential liability.
It’s free to attend.